Detroit Debt Proposal Favors Pension Funds

Rate to Resolve Obligations Would Be Roughly Double That of Bondholders

DETROIT—This bankrupt city is proposing to favor pension funds at roughly double the rate of bondholders to resolve an estimated $18 billion in long-term obligations, according to a draft of a debt-cutting plan reviewed by The Wall Street Journal.

The plan's balance-sheet projections show the base scenario designed by the city calls for $4.2 billion to be divvied up among the city's unsecured creditors, including some bondholders and the city's pension funds. The pot of money would be divided to allow Detroit's two...